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Operations Strategy

It is concerned less with individual processes and more with the total transformation process that is the
whole business. And how the competitive environment is changing and what the operation has to do in
order to meet current and future challenges. It is also concerned with the long-term development of its
operations resources and processes so that they can provide the basis for a sustainable advantage.

Four Perspectives on Operations Strategy

1. Top-down Perspective: Corporate objectives impact on business objectives which, in turn, influence
operations strategy.
2. Bottom-up Perspective: Day-to-day experience of providing products and services to the market
reveals problems and potential solutions which become formalized into operations strategy.
3. Market Requirements Perspective: Operations strategy should satisfy the organizations markets.
4. Operations Resource Perspective: Operations strategy should build operations capabilities.

Marketing Requirement Perspective:

The five performance objectives quality, speed, dependability, flexibility, and cost.

1. Quality
Quality is placed first in our list of performance objectives because many authorities believe it to be the
most important. Quality is discussed largely in terms of it meaning 'conformance'. That is, the most basic
definition of quality is that a product or service is as it is supposed to be. In other words, it conforms to its
Starbucks score high on Quality aspect. The highest quality, Arabica, coffee beans are purchased from
farms in developing countries. To add value for the customers, the coffee beans thenwent through a
physical transformation process where they were dark roasted, packaged, and delivered to the retail stores
or purchased through direct mail.
At the retail stores, the baristas brewed the coffee and serve it to the customers.
Starbucks learned early on that the quality of the coffee that ends up in the customers hands can be easily
ruined by mishandling activities in the supply chain. To control process quality, Starbucks had to manage
its own supply chain. Simply put, if the farmer does not get a good price for the green coffee beans, they
then would not invest in fertilizer and the maintenance involved in growing quality coffee beans.
The coffee can be under or over roasted. If the coffee beans sit on the shelf for too long they go stale, so the
right amount of inventory is a crucial factor, which in turn relates to the effectiveness of supply chain
management. The water used to make the coffee affect the taste. If the coffee is brewed improperly the
taste is affected. If the coffee sits in a pot more than 20 minutes it is no longer considered fresh. Serving
quality coffee in ceramic cups enhances the flavor, but makes it impractical for carry outs. Because of these
circumstances, Starbucks prefers to handle its own supply chain, open company-owned stores, and has
resisted franchising in fear of giving up its control over selling a high-quality product.
Because coffee was the core service at Starbucks, the job of purchasing was not outsourced. The
experience came with the original owners of Starbucks when only coffee beans were sold. The

entrepreneurs buying the coffee were considered connoisseurs of quality coffee and had many years of
coffee experience. As a result of this experience, customers were educated about coffee, and it became a
value-added service at Starbucks.
Also it has a deal with TCL, a coffee subsidiary of Tata Global Beverages Limited is supplying premium
coffee beans to Starbucks Corp.

2. Speed
Speed is a shorthand way of saying 'Speed of response'. It means the time between an external or internal
customer requesting a product or service, and them getting it.
Superior customer services is the core source of Starbuck competitive advantage and this particular
primary activity adds an enormous value to the brand image. Starbucks baristas are always genially polite
and greet regular customers by their names. Occasionally, regular customer may get their regular coffee
free of charge at the discretion of baristas as good gesture and such acts increase the perception of the
service quality to a considerable extent.
Furthermore, amid ever-intensifying hectic nature of lifestyle and increasing speed of the provision of
customer services, service at Starbucks is never rushed. It has been rightly noted that Starbucks spends a
lot of time measuring and improving how well they match their customers speed expectations
delivering a beverage in a matter of minutesthey dont let the need for speed suck the life out of the
Starbucks experience.

3. Dependability
Starbuck score high on dependability dimension also.
The coffee drinks are inert. Its the people that work at Starbucks that pass on the passion and knowledge
about coffee. Because baristas are expected to be more than transaction handlers, the skill involved is
higher than is required from a server at McDonalds, for example. Starbucks has traditionally invested
more on training than on advertising. Employees, partners as they are called, all go through 24 hours of
training on making a quality cup of coffee and learn about the all coffee varieties that are served at
In addition to training, there are other ways that Starbucks guarantees a reliable coffee drink. A poka-yoke
(error-proofing) technique is used to help relay an espresso drink order to the barista behind the espresso
bar (i.e., callout order, repeat order).
A typical service blueprint of the order process at Starbucks is shown in Figure

4. Flexibility
This is a more complex objective because we use the word 'flexibility' to mean so many different things.
The important point is that flexibility always means 'being able to change the operation in some way'.
Some of the different types of flexibility (product/service flexibility, mix flexibility, volume flexibility, and
delivery flexibility). It is important to understand the difference between these different types of flexibility,
but it is more important to understand the affect flexibility can have on the operation.
At Starbucks, the customer is in control of the process, thus, the baristas are trained to prepare a drink the
way the customer wants it. This can make the order process take longer time, but improves the sales
opportunity. One thing a barista will not do, for sanitation reasons, is make a drink with milk that customers
may bring in to the store with them.
Hence Starbucks score high on product/service flexibility.

5. Cost
There are two important points here. The first is that the cost structure of different organisations can vary
greatly. Second, and most importantly, the other four performance objectives all contribute, internally, to
reducing cost. This has been one of the major revelations within operations management over the last
twenty years.
"If managed properly, high quality, high speed, high dependability and high flexibility can not only bring
their own external rewards, they can also save the operation cost."
TCL, a coffee subsidiary of Tata Global Beverages Limited is supplying premium coffee beans to
Starbucks Corp. Starbucks Corps deal with TCL to source coffee bean from the homeland helps TSL to
avoid the 100 percent duty that Coffee Bean, Gloria Jeans Coffee and Costa have to pay and hence provide
a supply and cost advantage over its peers.
Also it follows the policies of premium pricing. So the profitability overall is very high.

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